If it is your first Personal Loan application, the process can get a bit confusing and appear complicated to you. This blog will help you understand a few things to clear this confusion before you apply for your first instant Personal Loan. Before applying for a Personal Loan, you need to keep a few things in mind. Today, many lenders offer Personal Loans with various terms and conditions. Understanding and comparing those requirements from different lenders will help you get an affordable loan with a lower interest rate. Lack of awareness about the requirements and basic information about a Personal Loan can lead to financial mishaps. After comparing all the lenders, you can find out the one that is suitable for your requirements. You can check the Personal Loan eligibility criteria and apply for an instant Personal Loan. Here are a few tips that you should keep in mind before your first Personal Loan application:

1. Research

First and foremost, before applying for an instant Personal Loan, you should do proper research which includes the verification of the lender. You should read a few blogs and articles plus check the information provided on the lender’s website. Going through the lender’s website will help you get the basic credentials of the lender and whether the lender is trustworthy and an authority in the field.

2. Evaluating your loan requirement

Creating a checklist before applying for a Personal Loan will help you understand all your requirements and those of the lender. But first of all, you must understand why you are applying for a loan; whether it is for the long term or short term, what is the purpose of the loan and what your repayment options are. Evaluating your loan requirement will help in better management of your financials.

3. Credit score

A credit score or a CIBIL score is a three-digit number ranging between 300 and 900 that signifies the creditworthiness of the borrower. With a good credit score, you have a fair chance to get a higher loan amount with a lower interest rate. A credit score above 750 is considered a good credit score. If you are a first-time borrower, you might not have a credit history. In that case, your credit report will reflect as NTC (New to Credit).

4. Check eligibility criteria

To avail of an instant Personal Loan, you have to meet certain Personal Loan eligibility criteria as mentioned on the lender’s website. Such Personal Loan eligibility criteria include age, income, employment status and experience, etc. Before applying for a loan, it is better to make sure you fulfil these criteria.

5. Compare the interest rate

Different lenders offer a Personal Loan at varying interest rates. The interest rate provided by a lender depends on internal policies and other market scenarios. As a smart first-time borrower, you must compare various lenders and choose the one with the most suitable rate of interest. As aforementioned, a good credit score will help you in availing of a Personal Loan with a lower interest rate. A good credit score gives confidence to the lender that you are likely to repay the loan on time. This will help you negotiate a lower rate of interest, a higher loan amount and flexible repayment tenure.

6. Avoid multiple loans

One of the common mistakes that a first-time borrower can make is taking multiple loans at the same time. No doubt a Personal Loan helps you tackle your urgent financial requirements but taking too many loans can impact your day-to-day finances.

7. Check loan tenure

Tenure is the time given to the borrower to repay the loan. The time is pre-decided before signing the final documents. A borrower can choose the desired tenure to repay the loan. Also, you can try and use an EMI calculator to check the exact schedule timeline of your repayment. It helps you track your repayment better along with your monthly EMIs.

8. Check for additional charges

During the disbursement of a Personal Loan, there could be various charges levied by the lender such as processing fees, documentation fees and other types of fees. Also, there could be pre-payment charges in case you wish to close your loan before the completion of the tenure. As a first-time borrower, you must be aware of the additional charges while you are applying for a loan. Lastly, before signing the final documents, you must read all the documents carefully.

Conclusion

If you follow the above-mentioned points, your first-time loan application, usage and repayment experience will be a smooth one. A loan is an excellent financial instrument to achieve personal, professional or business goals. Follow the right steps and you will be able to fully utilize this instrument to your advantage.

Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same.

You know it’s true. Personal loan applications can be a stressful undertaking. But what if we told you it didn’t have to be so intimidating?

People pursue personal loans for a variety of reasons: debt consolidation, home improvement plans, business investments, weddings (and honeymoons, of course), vacations, cars, medical emergencies, and the occasional shopping spree. Whether you’re seeking a personal loan for that perfect wedding ring or an unsecured personal loan to cover some unforeseen medical expenses, the steps to ensure a successful application are often the same.

Fortunately, some preparation and responsible financial planning are all it takes to set yourself up for loan approval. Follow these top tips to give yourself the best shot at a successful personal loan application.

1. Verify That You Meet the Criteria

Round up the simple stuff first. Your essential documents will likely include your ID, proof of income, proof of address, banking history, and statements from any other outstanding loans you may have. Obtaining settlement figures or statements for other outstanding loans you may also have is a great idea. Often, our customers are unaware of how much they have already borrowed.

Meeting the criteria for your personal loan will mean proving you have the financial stability to pay off your debt. Your credit provider may also have age requirements regarding their loans, often between the ages 21 and 60.

Avoid applying for loans you know you’ll never be approved for, as this can harm your standing for future loan applications. It’s important to be realistic, not ambitious, in these early stages of your personal loan application to avoid biting off more than you can chew.

Also note that over estimating or under estimating your settlement amounts can either lead to delays in drawdown or issues with approval – it pays to be exact in your calculations.

2.  Check Your Credit Report

Your credit score will be one of the most important determining factors in your loan application. You should always have an eye on your credit score but submitting for a formal credit report will be vital in proving in that can repay your loan. If your credit score isn’t quite as high as you might need it to be, then start taking the steps necessary to improve it. If you’ve defaulted on credit payments in the past and need help boosting your credit score, a bad credit loan can help accelerate the process.

3. Make Sure All Your Accounts are Current

This is similar to maintaining your credit score, but it’s important to make sure all of your existing lines of credit are kept current. That means making sure you’ve been paying your utilities, your mortgage, your car payments, and any other outstanding bills that may take priority over your loan payments. Your credit lender will want to know that no other obligations will get in the way of making your payments on time.

4. Demonstrate Good Saving Habits

Obviously, you won’t need to prove that you already have enough money to pay off your personal loan. If you had enough money in your savings, you wouldn’t need to take out a loan in the first place, but credit lenders like to see that you have good savings habits. That means maintaining a savings account and making regular (even if small) contributions to it. Proving that you don’t live outside your means, that your income outpaces your expenses, will send a strong message that you’re responsible enough to manage your personal loan.

5. Apply for the Right Amount and Have a Payment Plan

When applying for a personal loan, you need to have a detailed plan for the money you wish to borrow. Borrowing more than you need means paying unnecessary interest but borrowing too little could make a mess of your budget. Develop a plan for what you need and itemise exactly how it will be spent. Then, develop a budget plan to pay off your loan. Your credit lender will appreciate that you’ve done your homework and can account for where your payments will come from. An ethical credit lender will encourage you not to borrow more than you can handle.

Applying for a Personal Loan? Ask Questions and Stay Informed

Finally, ask questions. Ask many, many questions. You need to ask them now, not after you’ve signed on the dotted line.

Is there anything in the fine print you don’t understand? Are there any extra charges such as administration costs, origination costs, or pre-payment penalties?  Does your credit lender have a good reputation and satisfied local customers (check their website for testimonials or ask your friends and neighbours)? Is the APR consistent with the total amount repayable and the monthly payment?

A personal loan is an important investment and making informed decisions is critical. A Personal Lending Adviser is very useful in assessing your lending options and providing advice on ensuring the obtain the best approval for you. Personal Lending Advisers know what lenders like and dislike, and which lender is most likely to say yes to your unique profile.  Contact a Personal Lending Adviser at Max Loans today to help you get your personal loan approved.

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Doing the hard work before and during a loan application process won’t let money come so easily sometimes. As a result, borrowing from banks and other lending institutions has become a disappointment for Filipinos who have been declined several times already.

This is not the time to give up, though. We’ve listed down some useful personal loan tips to improve your chances of getting approved and what to do when you get rejected for a loan.

Want to know how to get approved for a personal loan? Check this list first before submitting that application.

1. Be Realistic with Your Numbers

Make sure you’re borrowing an amount you can realistically pay. You can use the debt-to-income ratio to measure how much of your salary should go to loan repayments.

The debt-to-income ratio compares an individual’s monthly debt payment to his or her monthly gross income.

How to Compute Debt-to-Income Ratio

To calculate your debt-to-income ratio, simply divide your monthly total debt payment by your monthly gross income and then multiply the amount by 100.

For example, if your monthly gross income is ₱25,000, and your monthly total debt payment is ₱10,000, your debt-to-income ratio is 40%. This means you spend 40% of your salary on monthly debt payments.

It’s best to keep your debt-to-income low because lenders may not approve your loan application if the ratio is too high. This is one of the top personal loan tips to keep in mind when getting a personal loan.

2. Understand the Types of Personal Loans Available

Learn about the types of personal loans in the market. You can get a secured or an unsecured personal loan, but what is the difference?

A secured loan uses one of your assets as collateral. If you can’t repay the loan, your lender has the right to seize your asset, which may be your vehicle or property. Moreover, the lender may sell it to cover the money you owed.

The amount you can borrow with a secured loan is typically higher than with an unsecured loan. The interest rates tend to be lower as well.

With an unsecured loan, you don’t have to put up collateral. If you miss repayments or default, your lender cannot take any of your assets to settle your debts.

Also, the amount you can borrow with an unsecured loan is smaller. The interest rates may be higher as well. However, it doesn’t mean defaulting on an unsecured loan has no consequences. Your credit history will be affected if you don’t pay your loan.

3. Compare Personal Loans

Many financial institutions in the Philippines offer personal loans, so it can get overwhelming. Do your research first, so you know your options—this is one of the most important personal loan tips.

According to the Bangko Sentral ng Pilipinas, borrowers consider the interest rate, loan amount, repayment period, and easy loan application when applying for a loan. Consider these factors as well when comparing loan products.

Apart from these, consider your loan needs and how much you can afford. Banks won’t loan you an amount you can’t pay. So, when comparing different loan providers, ensure that the interest rate, processing fees, and loan term are realistic in relation to your financial standing.

4. Talk to Various Lenders

Get in touch with lenders to know more about their loan products. You may call their customer service hotlines or inquire via email.

You can also head to your local bank and ask questions about the personal loan application process, time frame, terms, additional fees, and repayment schemes. This will help you fully understand the loan you’re trying to apply for.

Too busy to call or visit multiple lenders? Make your search for the best personal loan in the Philippines a lot easier through Moneymax. Our free comparison platform not only enables you to compare different personal loans but also conveniently apply for a loan.

5. Have Your Personal Loan Application Documents Ready

Before starting the personal loan application process, prepare all the documentation you’ll need. Different financial institutions may have different requirements, so contact your preferred lender ahead of time to get a checklist of the items you need to submit.

You have to submit a fully accomplished personal loan application form, a photocopy of your valid ID, and proof of income. You may have to submit additional document requirements, depending on your lender.

Check your lender’s eligibility requirements as well. Typically, those who are at least 21 years old and Filipino citizens or foreigners permanently residing in the Philippines are eligible for a personal loan. Some lenders may require a minimum gross monthly income for loan applications.

6. Check Your Assets and Liabilities

Assets are things you own such as properties, vehicles, and other investments. Liabilities, on the other hand, are your financial obligations, such as credit cards and mortgages. Lenders may look at these factors when you apply for a loan.

So before applying for a personal loan, check your outstanding liabilities. Having unpaid debt can impact your credit history, affecting how much you can borrow.

7. Improve Your Credit History

Financial institutions look at your credit history to determine whether you are a trusted and disciplined lender. If you pay your credit card balances on time every month, this shows that you can make the monthly payments on your loans.

If you have maintained a credit card with good standing, this shows that you have the discipline to pay off personal loans spanning two or three years.

8. Make Sure You Have Proof of Income

You have a better chance of loan approval if you’re employed than if you’re a freelancer. The risk for banks is lower because you have a steady flow of income, which means you’re financially capable of repaying your loan.

9. Be a Disciplined Borrower

Financial institutions also decide in favor of borrowers with multiple forms of credit that they repay regularly.

For example, you have three credit cards and a car loan. You pay all your credit card balances and loan amortization on time every month. It shows you can maintain a good credit standing while managing to pay multiple forms of credit.

However, don’t borrow more than you can afford. If you already have multiple forms of credit, but you can barely pay for them, getting a personal loan may not be the best idea.

10. Use the Lender’s Loan Calculator

To find out your possible loan interest, monthly installment amount, and fees, use the lender’s loan calculator on its official website.

Here’s a sample from Security Bank’s online loan calculator:[2]

First, enter the amount you wish to borrow. Remember, don’t borrow an amount you can’t afford to pay or don’t need. It’s not practical to pay a loan you won’t even use for your financial need.

Next, choose how long you want to pay for your loan. The loan duration or tenor plays an important role in determining the cost of your personal loan.

11. Improve Your Relationship with the Bank

Having a good relationship with your bank can help it evaluate your creditworthiness. Being a credit cardholder can help, but so can being a long-time client with several bank accounts.

Some banks don’t even look at how much you currently have in your accounts. More often, banks will check how long your accounts have been active and in good standing.

12. Know the Difference Between Good Debt and Bad Debt

Making a personal loan means being in debt to the loan provider. As a borrower, check whether you’re signing up for good debt or bad debt.

Good debt involves taking out a loan to fund something that will potentially grow your assets[3] in the long term. Examples of good debts are money spent on tuition fees, career advancement, home renovation, or business capital.

In contrast, bad debt involves borrowing money for something that will potentially reduce or prevent your asset growth. These things depreciate over time, like vehicles, shopping sprees, and unplanned purchases.

So know your goal before taking out a personal loan. This will determine whether it’s a good or bad debt. Borrowing money for something that will not help you gain financially is not practical and may lead to unpaid debt for years.

Whether you are applying for a personal loan for the first time and you want to know how to boost your chances of being approved, or you have been rejected for loans by providers before, this guide can help you understand how to successfully obtain finance.

If you have been rejected for a loan before, that doesn’t mean you can’t successfully apply for a loan in the future. Common reasons for rejection include a poor or limited credit history, applying too many times in a short space of time, or even something as simple as making a mistake on your loan application.

In some cases, these can be fixed. And even if the fix requires more effort, the sooner you start addressing any potential issues, the sooner you can access the finance you need.

1. Review your finances

Before you even apply for a loan, make sure you need it. If you can afford what you want to buy without taking out a loan, it might be better to do so in the long run. If you can’t afford something up front, work out how long it will take you to save up the money you need by budgeting.

Even if you do decide you need to take out a loan for your purchase, careful budgeting will help you figure out exactly how much you can afford to repay each month. This can then help you decide what kind of loan, if any, is right for you.

2. Research your options

Take the time to research the market and explore the range of credit options available to you. This can help you learn the basics of borrowing and whether a loan is the right form of credit for the goods or service you would like to buy.

Try to decide what type of loan you are looking for and whether you are eligible before applying to a lender. For example, you may prefer a secured loan, where lenders will require some form of security in case you fail to repay the loan, or an unsecured loan (also called a personal loan), where you simply pay off the loan each month.

3. Check your credit score

Your credit report has a significant impact on your loan application and whether it is successful or not. It informs lenders of the risk that lending to you presents to them, which is how they will decide how much they are willing to lend to you and if they are willing to lend to you at all.

Checking your statutory credit report through a credit reference agency is a free, quick and simple way of working out how lenders might view your application. It can highlight the areas where you could improve your score, which could then increase your chances of getting accepted for a loan.

Your credit score is calculated using data from your credit report and will help give lenders an idea of your borrowing power. Some credit reference agencies may charge a fee for access to your full credit report and score.

Typically, the higher your credit score the more likely your loan application is to be accepted, and the better terms you’ll receive. Although other factors will come into the decision making process, such as your income and the affordability of the loan itself, loan providers often reserve their best deals for those with excellent credit ratings.

4. Build up your credit history

A poor credit history is one of the most common reasons why a lender might reject your loan application. This is because it suggests you may not manage credit arrangements well.

If this is the case, there are several ways you could start to improve it. Checking your credit score can highlight some areas to work on, and you can also make sure that there are no mistakes on your credit report that could be affecting your score.

Paying bills and other payments on time and aiming to reduce any debt you may have could help build a score that shows you are a reliable consumer when it comes to managing debt.

5. Review outstanding credit

If you already have several credit cards or other loans, this could affect your chances of getting a further loan.

Lenders may be wary about lending you more money if you have several outstanding forms of credit, as they may think there’s a higher risk that you wouldn’t be able to repay the loan.

However, having open forms of credit won’t necessarily stop you from getting a loan. It will depend on the individual lender, how you have managed your credit commitments, and how much of your available credit you are using, and whether the lender thinks you can afford to take on more credit.

If you’re using most of the credit you have available, this could send a warning sign to a lender. For example, if you’ve used £1,500 on a credit card with a £2,000 limit, your credit utilisation rate is 75%. Lenders are likely to look more favourably on those with a lower utilisation rate.

6. Compare lenders

Comparing lenders is a simple way to boost the chance that your loan application will be approved by matching you up with the right provider.

Some providers set minimum income requirements and won’t offer loans to people with individual voluntary arrangements (IVAs) or county court judgments (CCJs), for example. Meanwhile, other lenders specialise in offering loans to people with bad credit.

This means it’s important to compare lenders and check their eligibility criteria to make sure you only apply for loans that are suitable for your situation.

NerdWallet allows you to check if you are likely to be accepted for a loan by clicking ‘check eligibility’. This could save you from being rejected by a lender and give you an idea of whether you might be offered a loan.

Checking your eligibility in this way carries out a ‘soft’ check, which won’t leave a mark on your credit file.

7. Double-check your application

A small mistake or discrepancy on your loan application can result in rejection. Make sure you enter all information accurately, including your address, date of birth and residency status to allow your application to progress.

8. Space out credit applications

If you are rejected for a loan, think carefully before you make another application. The more ‘hard’ credit checks a lender sees on your file over a short time period, the more wary they are likely to be about lending to you. Your desire for credit will send a red flag to lenders about your ability to manage your finances responsibly.

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Are you contemplating taking a personal loan to fund a large payment? A personal loan can definitely help you to make payments for your various credit needs such as planning a family vacation, a wedding, renovating your house, etc. In addition to not needing any collateral, the documentation process is also not as complex as some of the other loans.

Hence, it might seem extremely simple to avail the benefits of a personal loan. However, there are a few important things you must keep in mind while looking for a personal loan. Read our list of 9 most handy tips that will definitely help you with your personal loan.

Take a Loan Only When Absolutely Necessary

A personal loan should only be taken after a thorough assessment of your requirements and already existing loan/repayment commitments. It is important to understand that while a loan will help you pay for your short-term goals, it will be an additional payment for the next few months/years that you will have to do without fail. Hence, it is imperative to ensure that you will be able to make the monthly payments within your monthly income.

Research Thoroughly Before Applying

With the increase in the number of personal loan providers and their bold claims, it is possible to get swept away with the most attractive loan offer without reading the terms and conditions carefully. Hence, it is essential to do thorough research before selecting your personal loan. Ensure that you compare features such as interest rates, loan tenure, processing fees, etc. and pick the loan provider that matches your financial needs.

Look for Lowest Interest Rate

Personal loans generally have high-interest rates owing to the fact that there is no collateral taken as a guarantee. As the interest to be paid is high, even a small difference in the interest rate can mean a huge difference in the total amount you would have to pay as interest. This makes it very important to look for loan providers that can offer you a good deal on interest rate based on your credit score and requirements.

Check Eligibility Criteria

Before you narrow down on the bank and the loan that best suits your needs, make sure you check that you meet the eligibility criteria of the loan you’re interested in. One of the most important eligibility criteria is your income and credit score, as these indicate your loan repayment ability. The higher your income and credit score is, the more likely you are to get a personal loan for a higher amount

Maintain High Credit Score

Along with your income, a high credit score will definitely boost your chances of getting a personal loan with the desired interest rate and tenure. This is because a low credit score will be an indication of a poor repayment history causing banks to be apprehensive about granting loans to you. Therefore, it is very critical to clear all your debts and pending credit card bills prior to a new loan application.

Be Careful of Additional Charges

Before you settle with one bank to apply for your personal loan, make sure you take into consideration other factors apart from just the interest rate and duration, such as processing fees. Get personal loans up to INR 50 lakh at attractive processing fee with Standard Chartered for online applications!

Check Prepayment Charges

Prepayment is the settlement of the loan prior to the official due date; either by paying the full amount or settling a part of the repayment. Although prepayment option is only allowed by certain banks and loan providers, it usually requires the borrower to make an additional payment and can only to be done after 12 months of the loan being sanctioned. It is important to go through the prepayment terms and conditions prior to finalising your personal loan.

Make Timely Repayments

Any loan or credit you take is a commitment to repay it diligently and without fail for months/years. Timely repayments not only prevent you from unwanted penalties, but it will also ensure your credit score does not get impacted negatively. Maintaining a good repayment history is crucial in maintaining a high credit score, which will only help you in the future for availing any more credit/loan.

Shorten the Loan Tenure

You might come across loan providers who allow very long repayment periods low EMI options, which might be very tempting. But, it is worth noting that in such long-term loans, the total interest you will have to pay can be very high.